The year of 📉: A Founders + Funders review

It’s Vieje here to close the book on 2022. First off, on behalf of Secfi, I’d like to wish you all a happy holiday season. I hope you get to spend time with your loved ones and take some time away from work. I’ll be heading on my honeymoon to Vietnam, Thailand, and Singapore. It’s been 6 years since I was in SE Asia and I can’t wait to be back. A long trip away is exactly what I need to close out this exhausting year.

For the last newsletter of 2022, we thought it was fitting to do a Founders + Funders year in review. I asked Chris, John, and some of my Secfi colleagues to weigh in on some of their bests and worsts of the year in personal finance, startups, tech, and beyond. We had a lot of fun writing this one so I hope you all enjoy it.

I also want to thank all of you for continuing to read this newsletter (nearly) every week, and for all of the feedback you’ve shared. It’s been both humbling and rewarding. When we launched this over the summer, we weren’t sure where this thing would take us or how you, our readers, would react (if you would at all!).

We’ll be back in 2023, so I’d love to hear from you about what you’d like to see us write about. If you like what we’re doing, I’d also appreciate you sharing what we’re up to with your friends and colleagues.

As always, hit me up on Twitter or reply to this email if you have any feedback.

2022… the year of 📉

This year was obviously a very difficult one financially. The S&P is down almost 17% and the Nasdaq is down almost 30% YTD. Financial reviews are always easier during a bull market, but I’d argue that you probably learn much more during a down market.

Let’s start this on a positive note.

✨ What was the best financial decision you made this year?

Chris Arnold (Lead Financial Planner): Looking back, the best financial decision I made this year was keeping the funds I had allocated for a down payment in a high yield savings account.

Going into 2023, my Marcus account was yielding 0.50% and the meager amount of interest I was earning wasn't getting me any closer to my target goal. Meanwhile, just 12 months ago, the stock market was hitting a new all-time high daily. I was tempted to transfer a portion of my "down payment" funds into my investment account, to accelerate the timeline for when my wife and I would be ready to start the home search process. Fortunately, I remained disciplined and kept those funds in my savings accounts and we're now "on track" to begin house hunting this Spring.

John Morrison (Head of Portfolio Management): The best thing I did was take out a home equity line of credit and invest the proceeds in the stock market.

Let me explain…I essentially had a liquidity mismatch. I had a substantial private investment that I sold on September 30th, 2022, however, I wouldn’t receive the cash from the sale for approximately eight weeks. I knew this ahead of time and I didn’t want my asset allocation to be off target for nearly two months. A lot can happen in two months! So I proactively got a home equity line of credit, drew upon it, and invested that money in the market on September 30th. When the money from my private investment hit my account, I paid down the HELOC. From September 30th to November 30th, the market was up ~14%. Had I not done what I did, I would have missed out on that rally.

Being disciplined about your asset allocation is important because we never know when the market will rally.

Vieje Piauwasdy (Senior Director of Equity Strategy): During my 2021 year-end financial review, I realized just how over-concentrated my crypto positions had become because of gains. In other words, my portfolio really needed to be rebalanced.

So at the beginning of 2022, I forced myself to trim my crypto positions significantly. It was admittedly difficult at the time, but it was a smart financial move back then — and in retrospect. Needless to say, this year would’ve been much worse financially if I didn’t do that. Yay for diversification and financial plans!

😫 What was the worst financial decision you made this year?

Chris: I purchased Twilio after the stock fell below $200, following its earnings release this past February. I had recently listened to the Business Breakdowns podcast episode where they unpacked Twilio's business model and discussed how large the addressable market was for companies who could benefit from Twilio's services. I had read Jeff Lawson's book, “Ask Your Developer,” and aligned with his leadership style and his product vision for the company.

The fact that he was an early AWS developer and groomed under Bezos at Amazon, also boosted my confidence in Twilio's future. Analyst had a price target for Twilio stock at $350, so I felt pretty confident I was buying Twilio at a bargain price. Turns out, Twilio stock has fallen 70% from where I bought the stock in February. I learned the hard way that analysts' price targets are wrong ALL the time and a 40% "margin of safety" between your purchase price and the price target of a stock does not mean it's a "bargain."

John: I signed a contract to build an “accessory dwelling unit.” It’s essentially a studio apartment in my backyard that I plan to rent out for income. But…it has been such a headache.

Not only has it been more expensive than expected, and initially quoted, but it’s also been a huge time suck and I thoroughly regret it. Maybe I’ll change my mind after it’s complete and generating income, but right now, it’s feeling like a bad idea. For those of you looking for “passive income” from real estate. I can attest, it’s anything but “passive.”

Vieje: While I don’t regret making any angel investments in the last year, I admittedly got a bit carried away in terms of sizing the investments. The nature of angel investing is that it’s very risky and you should be prepared to lose the entire investment most of the time. I primarily angel invest to stay connected to the community, plus love helping out founders and operators. With that said, I got caught up in the game and wrote a couple checks bigger than my financial plan allows.

💰 What was the best and worst financial prediction for the year?

Vieje: I have to give the best to Keith Rabois calling top on November 19th, 2021. He’s been through this before and that was some simple but wise analysis.

John: For worst, I have to go with Cathie Wood. On December 17th 2021 she predicted the ARK Innovation ETF would return 40% compound annual returns for the next five years. The ETF is down nearly 63% since her prediction. For the fund to achieve the 40% compound annual return prediction by the original deadline, it would need to return nearly 100% per year for the next four years. Even without the benefit of hindsight, the prediction is absurd. 100% annual returns, or even 40% for that matter, are very rare. Those are unexpected numbers no matter how you slice it. To state the obvious, you shouldn’t expect the unexpected. You’re better off expecting the average and preparing for the inevitable volatility that comes with investing rather than making bombastic predictions in any direction.

If you couldn’t tell from my tone above, I don’t like making predictions much. I view the world probabilistically and predictions are just so binary. So my vote for best prediction is no prediction.

🧦 Without defining “best” and “worst”, name your best and worst stock (anything goes!)

Chris: My laggard would be SVB Financial Group. As a commercial bank primarily servicing the technology and life sciences industries, its stock has suffered the same fate as many of its customers. To the surprise of many, Exxon is leading the pack for performance this year at nearly 70% YTD!

John: The worst has to be Meta. At the beginning of the year, Meta’s market cap was nearly $1 trillion. Now it’s ~$320 billion. That is mind boggling value destruction. For reference, the Troubled Asset Relief Program (TARP) from the 2008 financial crisis (the bank bailout) was about the same size, $700 billion.

The easy answer for best is basically ANY energy stock. The energy sector as a whole is up over 50% this year (via iShares US Energy Sector ETF proxy)!

Vieje: For the worst, I have to go with the personal angle and say Peloton. Every millennial investor who owned a Peloton — including myself — seemed to be all in on Peloton at one point. They had the potential to be fitness juggernauts. Unfortunately my dream of Peloton cafes was shattered along with the stock.

For best, [insert any defense stock] here. I should also give a nod to my fellow private company employees though… shoutout to my friends at Anduril. Y'all are hot hot right now.

John: This isn’t a stock, but one of the best assets this year is I-Bonds. I-Bonds are special savings bonds issued by the US government that have a fixed interest component and a variable component that changes with inflation. Earlier in 2022 they were yielding 9.62%, fully backed by the US government. As inflation has come down, the yield has also fallen, but they still have a phenomenal risk/reward profile and are yielding 6.89%.

🏖️ We were promised 4-day work weeks and paid trips to Ibiza!

This newsletter is aptly named Founders + Funders, so we’d be remiss not to have an entire section dedicated to startups and VCs. It’s been a tough year for us in startup land. Valuations have been on a steady decline, secondary markets have dried up, and this is the most difficult funding environment since 2008. But hey, it’s a damn good time to build!

💾 Without defining best and worst, what is your best and worst startup of the year?

Vieje: We’re a pro-startup and founder newsletter and company, so we normally wouldn’t answer the “worst startup” question. But this year I’ll answer for everyone and say FTX is the worst by a large margin.

John: I’m going with Figma for the best startup of the year. They created a phenomenal product and Adobe is paying $20 billion to bring them into their fold.

📚 Any good startup stories to share from the year?

John: I’m new to the startup space. Until Secfi, my career has been with large, established companies. What has blown me away is the speed at which things get done in startups. It’s amazing. I’m used to committees, working groups, consensus building, and “stakeholder management.” In a startup, you often dispense with all that and just build stuff and I’m loving it.

Vieje: I rode in a Cruise driverless car back from the bars to my apartment a few weeks ago. I couldn’t believe that this is actually a thing and you can take a driverless taxi home nowadays. I can’t wait for the driverless car rides from SF to Tahoe… that’s going to happen in my lifetime right?

There’s more to life than startups and finances… right?

While we may seem like the biggest startup, tax, and finance nerds on the planet, we do, in fact, have lives… sometimes. We’ll end the last post of the year on a fun note and focus on some of the positives of the year.

📽️ What was the best and worst thing you watched?

John: The worst for me was “Squid Game.” It was all the rage so I finally decided to give it a shot and I hated it. I thought it was predictable, inconsistent, and the ending was just flat out bad. I know I’m going against the grain here, to each their own!

The best was the Sheng Wang comedy special. I’m a fan of stand-up and stumbled on this special on Netflix and it was hilarious. It had me laughing out loud multiple times.

Vieje: Watching my University of Washington Huskies beat Oregon in Autzen was by far the best thing I saw on TV all year. Second place to “Top Gun: Maverick.” Man, that movie was electric.

Martin Malloy (Head of Brand & Content): I guess as the self-confessed cinephile in the company and former film critic, I get to jump in here and relive the days of building my top 10 list. Though, it’s been many years since I actually saw nearly every film that came out.

Best? “Everything Everywhere All At Once” is getting criminally left out of end-of-year lists, but “Banshees of Inisherin” was also amazing.

Worst may be “Pistol,” the miniseries about The Sex Pistols (which I admittedly didn’t finish). It distilled what I assume (or hope) was a pretty exciting time in UK music into a poorly acted soap opera.

Dani Diniz (Capital Marketing Analyst): Best thing I watched was “The Unbearable Weight of Massive Talent” with Nic Cage.

Maksim Iakovenko (Frontend Developer): Best movie I saw was “Don’t Look Up.”

🥫 What was the best and worst thing you ate this year?

Vieje: I’ve been dreaming of that beef tartare and ikura dish at Ernest in San Francisco for the last few months. Speaking of amazing food in the Mission/Potrero Hill area, someone get a reservation and invite me to Sam Ho Wan please. My DMs are open.

John: This is timely, I just ate at Canje in Austin, TX and it might be my favorite restaurant here. It was phenomenal. Every single thing I tried was great, especially the ceviche.

My worst is Trader Joe’s Candy Cane Joe Joe’s. I’m addicted, they are delicious but not the healthiest food in the world and I almost wish I had never discovered them.

Martin: The best may have been the multiple course dinner at Shiro’s Sushi in Seattle for my birthday. Or the Rubenstein’s lox bagel I had the next morning (where are all the good bagels on the west coast??).

Kane Li (Senior Manager, Global People Operations): The best is a toss up between the porchetta at my wedding or a spitfire roasted lamb at Thanksgiving. The worst was the spaghetti I got at a restaurant with WAY TOO MANY olives (don’t ask why there were olives to begin with).

Dani: Best thing I ate was my mom’s Arepas. Worst thing was a watermelon steak (just tasted wrong).

Maksim: Best thing I ate was smoked aubergine at Mana Mana in Amsterdam.

Gina Bucio (Senior Manager, Strategy and New Ventures): Worst was definitely fermented shark in Iceland. 🤢

Ioana Stanescu (Backend Chapter Lead): The best meal I ate was the teppanyaki dinner at one of the Okura hotel’s restaurants. Most disappointing was the seafood platter at Seafood Amsterdam, oily and overcooked. 😞

💪 Let’s close this out strong. Highlight(s) of the year!

John: My wife is an artist and this year she was featured in multiple shows (some group, some solo). She quit her corporate career a few years ago to make a go at painting full time. Anyone who knows an artist knows how incredibly difficult and competitive it is to get into any show. So my highlight has been watching her hard work and creativity be appreciated.

Vieje: Well, I got married so that probably takes the cake.

Martin: My wife getting pregnant and officially on track to have kids outnumber adults in our house. But also seeing some concerts for the first time since COVID. Pavement at The Masonic was epic!

Dani: Travel opening up so that I could see my family for the first time in 2 years! Also seeing a friend start to win his fight with depression.

Jon Rios (Chief Compliance Officer): Taking my mom and her best friend to Europe for two weeks, and working somewhere that allowed me to enjoy every moment of it!

Ioana: Going to 4 concerts (RHCP, Rammstein, Porcupine Tree, and Hooverphonic). RHCP and Hooverphonic were a big part of my teenage years’ playlists! Also six trips, three of which were spontaneous and probably the best ones.

Happy Holidays, Secfi fam! See you all in 2023. We’ll do it bigger and better next year.

Things we’re digging:

• 👀 All eyes are on 2023. Could valuation decreases pave the way for IPOs to come back?
• 🐦 The people have spoken…except for when I don’t like it
• 🪙 What is the right answer? Is there one??